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asset turnover is a measure of how well the assets of a business are being used to generate sales and is calculated as :
revenue or sales / total assets ?
or
revenue or sales / total long term capital ?long term capital which is mean that non-current liabilities such is borrowing ?
example if :
sales or revenue is 100,000 / 111,450 = 0.9 mean I have 0.9 times to cover to pay the company’s interests ?thank you
hi sir , i’m sorry, my question is an example of 0.9 means that 0.9 times for internal use of the sales ? thank you
Asset turnover is sales / total assets less current liabilities.
(Total assets less current liabilities is, of course, equal to long-term capital (which is equity plus long-term borrowing (non-current liabilities)).
(There is also non-current asset turnover – this is sales/non-current assets)
0.9 does not mean “cover to pay the company’s interests”. It simply means that the sales are 0.9 times the long-term capital, and any business would want this ratio to increase.
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